United Kingdom Gross Domestic Product (GDP) rose by 0.4% quarter-on-quarter in the second quarter of 2026, according to both Societe Generale and TD Securities, with the growth primarily attributed to robust business investment and resilient consumer spending [1][2]. TD Securities highlights that June GDP surprised to the upside at 0.3% month-on-month, driven by a strong services sector expanding 0.4% month-on-month, while May was revised to flat, making June the only positive growth month in Q2 [2]. The quarterly growth of 0.4% slightly exceeded the Bank of England's (BoE) projection of 0.3% quarter-on-quarter [2].
Societe Generale's Sam Cartwright notes that investment in ICT equipment, likely linked to AI, has been a key growth driver since the fourth quarter of 2024, contributing 0.45 percentage points to GDP against a total increase of 1.9% since then [1]. However, Cartwright forecasts that GDP growth will slow to 0.1% quarter-on-quarter in the second half of 2026, matching the BoE's July Monetary Policy Report forecast, as temporary supports such as the World Cup and favorable weather fade, and energy-related headwinds intensify [1]. The full-year 2026 GDP growth is expected to reach 1.1%, which is above Societe Generale's previous forecast of 0.7% at the end of 2025 [1].
TD Securities cautions that the upside surprise in Q2 GDP should not be interpreted as a fundamental growth story, noting that the strength is at least partially due to Q1 performance. TD argues that the data is unlikely to influence Monetary Policy Committee (MPC) members currently voting to hold rates to consider a hike at the next meeting [2].
Both sources mention ongoing risks, with Societe Generale identifying the unresolved US-Iran conflict as a key risk, though UK activity data has so far remained resilient to this crisis [1]. Speculation over potential Autumn Budget tax rises and restrictive monetary policy are also cited as factors that could dampen growth in the coming months [1].
CONCLUSION
UK GDP growth exceeded expectations in Q2 2026, driven by strong services and business investment, particularly in ICT equipment. However, both Societe Generale and TD Securities expect growth to slow in the second half of the year due to fading temporary supports and intensifying headwinds. The data is not seen as a catalyst for immediate monetary policy changes, and risks such as the US-Iran conflict and potential tax rises remain in focus.